1 Regulatory Reform of Domestic Regulations in the Telecommunications Sector - Japanese Experience- FURUICHI, Hirohisa Senior Advisor General Affairs Division

1

Regulatory Reform of Domestic Regulations in the Telecommunications Sector

- Japanese Experience-

FURUICHI, HirohisaSenior AdvisorGeneral Affairs DivisionTelecommunications Bureau

MINISTRY of PUBLIC MANAGEMENT, HOME AFFAIRS, POSTS and TELECOMMUNICATIONS

2

Outline

1. Summary

2. Japanese Experience

3. Current Situation in Japan

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1. Summary

Japan has, since early days, established and administrated a transparent regulatory framework in the telecommunications sector. The continual regulatory reforms including recent efforts for further enhancing transparency in licensing requirements have contributed to realizing a business-friendly environment and to its telecommunications industry to become competitive in the global market.

4


(1) TransparencyTransparency

(2) Licensing Procedures, Technical Standards

(3) Public Comment Procedures

(4) Procedures for Adverse Dispositions

(5) Regulatory Reform

5


(1) TransparencyTransparency All laws, ordinances and regulations

are made public by means of an Official Gazette.

Laws and regulations are also made public on the website

6

2. Japanese Experience(1) TransparencyTransparency Telecommunications laws and regulatory guidance

are uploaded in English to the greatest extend possible. (ex. http://www.soumu.go.jp/joho_tsusin/eng/laws.html)

7


(1) Transparency

(2) Licensing Procedures, Licensing Procedures, Technical StandardsTechnical Standards




8



Telecommunications licensing procedures and technical standards are stipulated in Laws, ordinances and related examination standards.

9



The Japanese Telecommunications Ministry has established the standard processing period for licensing procedures since 1987.

10



The Minister shall inquire the Councils including the Telecommunications Council and the Radio Regulatory Council before making such regulations as licensing procedures, technical standards and licensing criteria.

11


(1) Transparency


(3) Public Comment Procedures Public Comment Procedures



12


(3) Public Comment ProceduresPublic Comment Procedures The Japanese Telecommunications

Ministry has established the Public Comment Procedures since 1985.

The Minister shall request the public to submit opinions on proposed regulations which are taken into consideration before before the adoption and the implementation of the proposed regulations.

13


(1) Transparency



(4) Procedures for Adverse Procedures for Adverse DispositionsDispositions


14



The Japanese Telecommunications Ministry established the Procedure for Adverse Dispositions in the early days.

15


(1) Transparency




(5) Regulatory ReformRegulatory Reform

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Abolition of Restriction on Foreign Participation imposed across on board.

Abolition of Entrance Permission.

Abolition of tariff regulations for non-dominant carriers

17


(1) Increasing number of Telecommunications Carriers and Progress of Competition

(2) Expansion of Telecommunications Market

18

3. Current Situation in Japan(1) Increasing number of Telecommunications

Carriers and Progress of Competition

20020722

0

2,000

4,000

6,000

8,000

10,000

12,000

Ｓ６０ … Ｈ４５６７８９１０１１１２１３１４

General Type-Ⅱ Carriers Special Type-Ⅱ Carriers Type- Ⅰ Carriers

(FY）

(companies）

03.Dec.1

Increasing number of Telecommunications Carriers

There is a clear distinction between Type-I and Type-II carriers; the former is a carrier owning telecom facilities and providing telecommunications services, and the latter rents the facilities owned by Type-I carriers and provides services other than those offered by the Type-I carriers.The Type-II carriers are classified into two groups; the special Type-II carrier provides the international telecommunications service, as

well as the voice communication service for an unspecified number of people by making PSTN connections, and the other is the GeneralType-II carrier.

※ Classification of Telecommunications carriers

Type-I telecommunications carriers : 7Special Type-II carriers : 9General Type-II carriers : 200

Total : 216(As of April 1, 1985)

Type-I telecommunications carriers : 7Special Type-II carriers : 9General Type-II carriers : 200

Total : 216(As of April 1, 1985)

Type-I telecommunications carriers : 417(*Of these, CATV business operators): 305Special Type-II carriers : 113General Type-II carriers : 11,872

Total : 12,402(As of Dec 1, 2003)

Type-I telecommunications carriers : 417(*Of these, CATV business operators): 305Special Type-II carriers : 113General Type-II carriers : 11,872

Total : 12,402(As of Dec 1, 2003)

0202010100009999989897979696959594949393929219851985

All copyrights reserved (MPHPT)

19



0

100

200

300

400

500

0

500

1000

1500

2000

KDDI 85.4.1 KDDI 96.11.23 98.12～96.11～

98.1.7から

9yen10yen

5

10

9yen～8.7yen

8.5yen～8.4yen

▲ 25%

▲ 15%

NTT Com 01.Mar.1～ Fusion 01.Apr.1～ C&WIDC 02.Apr.21～KDDI 01.Mar.1～ MEDIA 02.J an～ HEISEI 03.J ul.15～

J T 01.Mar.1～TTNet 01.Mar.1～

４００円

～

0

TTNet54yen

C&WIDCHEISEI DENDEN18yen

Fusion Communications CorpMEDIA20yen

NTT Com, J TKDDI 80yen▲ 80～96％

NTT 83.7.21～

1,530円

KDD 85.Apr.1～98.Dec～

▲ 90～96%

8.2yen～7.5yen

96.Nov～

① Long-distance call rate (Tokyo - Osaka)① Long-distance call rate (Tokyo - Osaka) (Three-minutes, week-day, day-time rate)

② Local call rate ② Local call rate (Three-minutes, week-day, day-time rate)

MEDIA 02.J an.30～HEISEI DENDEN

02.Feb.1～

MEDIA 8.2yenHEISEI DENDEN7.5yen

01.May.1～

NTT East･WestKDDI,JT,NTT Com8.5yenTTNet,QTNet8.4yen

01.J an.10～

NTT East 9yenTTNet 8.7yen

TTNet,QTNet 9yen

TTNet 98.J an.7 ～QTNet 99.Apr.1～

NTT 76.Nov.17～

260円

70円

0

100

200

300

400

93.3.25 現在

20,000

15,000

10,000

5,000 100

200

300

400

NTTﾄ゙ｺﾓ93.3.25

NTTﾄ゙ｺﾓ93.3.25

NTT 9ﾄ゙ｺﾓ中央ほか社00.12.1～

J -PHONE東日本1 99.6.1ほか社～

0

④ Mobile communication rate④ Mobile communication rate

Basic fee17,000 yen

▲ 75%

4,300 yen

Telephone call rate (Mobile phone → fixed telephone in the same prefecture)

260 yen

▲ 73%70 yen

NTT DoCoMo

93.Mar.25

J-PHONE

99.Jun.1 –

NTT DoCoMo

93.Mar.25

NTT DoCoMo Central and nine other companies

00.Dec.1 -

Note: March 25, 1993 is the day when the 800 MHz digital system was launched. NTT DoCoMo’s basic charge has been 4,500 yen (including the 200 yen for free-of-charge calls) since June 2000.

③ International call rate (Japan - U.S. )③ International call rate (Japan - U.S. )(Three-minute, week-day, day-time rate)

KDD 450 yen(96.Nov.23)JT 440 yen(96.Dec.20)C&W IDC 440 yen(96.Dec.20)

MCIWCJ 150 yen(98.Dec.1)JT 180 yen(99.Oct.1)C&W IDC 180 yen(99.Oct.5)KDDI 180 yen(99.Nov.1)TTNet 132 yen(99.Nov.11)DTJ 75 yen(00.Dec.10)NTT Com 160 yen(00.Apr.3)Fusion Communications Corp.

45 yen(01.Sep.1)MEDIA 45 yen(02.Jan.30)HEISEI DENDEN 45 yen(02.Feb.1)

Reduction of Telephony Service Charge

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70 8

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

99-3 99-6 99-9 99-12 00-3 00-6 00-9 00-12 01-3 01-6 01-9 01-12 02-3 02-6 02-9 02-12 03-3 03-6 03-9 03-12

Cable Internet●Subscribers：Approx. 2,510,000●Operators ：306

(End-Jan. 2004)

Cable InternetCable Internet●Subscribers：Approx. 2,510,000●Operators ：306

(End-Jan. 2004)

61 2 9 16 17

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

00/09 00/12 01/03 01/06 01/09 01/12 02/03 02/06 02/09 02/12 03/03 03/06 03/09 03/12

Fiber-Optics(FTTH)

（for general users）●Subscribers：960,926●Operators ：12

(End-Jan. 2004)

FiberFiber--OpticsOptics(FTTH)(FTTH)

（for general users）●Subscribers：960,926●Operators ：12

(End-Jan. 2004)

960,926

2,510,000

DSL●Subscribers：10,612,671●Operators ：44

(End-Jan. 2004)

DSLDSL●Subscribers：10,612,671●Operators ：44

(End-Jan. 2004)

10,612,671

Current Status of Broadband Penetration in Japan - Number of Subscribers -

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Carriers and Progress of Competition Current Status of Broadband Penetration in Japan - Comparison with Other Countries -

US (End-Jun. 2003)

DSL CATV Other (Satellite, FWA, etc.)

53.8

643.0

1,366.0

DSL CATV Other (Satellite, FWA, etc.)

Korea (End-Dec. 2003)

382.8

643.5

91.4

Japan

FTTH DSL CATV

3.2

251.0

FWA,etc.DSL

1.9

Malaysia (End-Dec. 2002)

DSLUK

DSL

450.0

Germany (End-Dec. 2003)

CATV

96.0

DSL

12.9

CATV

10.0

(End-Dec. 2002)

167.4 133.1

1061.2

1: CATV refers to high-speed Internet connection services through CATV networks.

2: Except for Japan and the U.S., subscribers to DSL and/or Cablemodem only are shown.This is due to a lack of data, not because other services are unavailable in some countries.

3: Source: MPHPT for data on Japan, Singapore and Malaysia; FCC Report on USA; MIC on Korea;OFTEL on U.K.; OECD on France and Germany.

Note:

(Ten thousand subscribers)

6.0

CATV

(End-Nov. 2003)

Key Fact:Key Fact: In the number of broadband subscribers, Japan is one of the most advanced countries in the world.

(End-Jan. 2004）

FTTH

1.6

DSL

7.017.6

CATV FWA,etc

1.9

(End-Mar. 2003)Australia

France

DSL CATV

210.0

39.3

(End-Jul. 2003)

Singapore

(End-Dec. 2003)

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Japan

Others

About 64% About 36%

Korea

KT

About 81%

US

About 85%

About 15%

UK

BTAbout 99.4%

About 0.6%

Germany

DTAbout 93.6%

About 6.4%

【End-Jan. 04】

【End-Nov. 03】Source: Oftel's Internet and Broadband

Brief – Nov. 2003

NTT East & WestRBOCs

Others

Source: MPHPT

OthersAbout 19%

Others

Source: FCC “High-Speed Services for Internet Access”

【End-Dec. 03】【End-Jun. 03】Source: Ministry of Information and Communication (MIC)

Others

【End-Jul. 03】Source: EC “9th Report on the Implementation of the Telecommunications Regulatory Package”

Current Status of Broadband Penetration in Japan - Comparison of Competition in the DSL Services Market Based on Unbundled Lines-

Japan’s promotion of pro-competitive policies has resulted in it becoming the country with the most competitive market.

(NTT East & West’s share of the market is about 36%.)

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22.69 22.69 23.50 25.15 23.50 25.15

39.95 38.04

22.6518.67

53.84

24.23

16.09 16.09 18.65 27.98

41.3038.04

25.15

39.95

23.5025.1523.50

38.7838.78

46.65

24.23

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

for operators for ISPs

Notes:1）Fees are as of March 2003 except the fees of 24M service of NTT East and 26M service of Softbank BB, which are as of July 2003,.

The 40M & 45M services are scheduled to be launched at December 2003.2) Foreign exchange rates were calculated on the basis of the TTS (Telegraphic Transfers Selling) rate on March 31, 2003, which was 121.20 yen to

the US dollar, 193.45 yen to the British pound ,131.33 yen to the Euro, 88.87 yen to the Swiss franc and 0.0979 yen to the Korean won.3）Tax not included.

USD/month

500kbps/256kbps

512kbps/128kbps

24Mbps/1Mpbs

768kbps/128kbps

768kbps/128kbps

1.5Mbps/256kbps

24Mbps/1Mbps

600kbps/128kbps

OCN (ACCA)

Verizon(New York)

BT (London)

NTT East

FT(Paris)

DT (Berlin)

KT (Seoul)

Current Status of Broadband Penetration in Japan - Fees for DSL -

Swisscom(Geneva)

As a result of advancing competition, the fees for DSL services in Japan are the most inexpensive in the world.

40Mbps/1Mbps

40Mbps/3Mbps

26Mbps/1Mbps

Downstream/ Upstream

Softbank BB

OCN (ACCA)

NTT East

Softbank

BB

45Mbps/3Mbps

53.84

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1. Price per 100 kbps (US$)

6.6

6.4

6.1

5.9

5.8

5.4

5.0

4.4

4.0

3.9

3.5

3.4

3.3

2.7

2.6

2.2

1.3

1.2

0.3

0.1

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Norway

UK

Italy

Austria

Denmark

Bahamas

Lithuania

Germany

Israel

Slovenia

United States

Netherlands

Canada

New Zealand

Macao, China

Singapore

Hong Kong, China

Belgium

Korea

Japan

2.　 100kbps as % monthly income

0.42

0.40

0.38

0.30

0.29

0.26

0.25

0.25

0.24

0.22

0.20

0.16

0.15

0.14

0.12

0.11

0.05

0.05

0.02

less than 0.01

0.0 0.1 0.2 0.3 0.4 0.5

Bahamas

Finland

UK

Italy

Slovenia

Austria

Denmark

Israel

Norway

Germany

New Zealand

Macao, China

Netherlands

Canada

United States

Singapore

Hong Kong, China

Belgium

Korea

Japan

ITU Internet Reports: Birth of Broadband (September 2003)

25



0

1 ,0 0 0

2 ,0 0 0

3 ,0 0 0

4 ,0 0 0

5 ,0 0 0

6 ,0 0 0

7 ,0 0 0

8 ,0 0 0

9 ,0 0 0

1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2

F ix ed C o m m u n icatio n ( S u b s cr ib e r 's lin e + I S D N )

S u b s cr ib e r 's lin e

M o b ile C o m m u n ica tio n ( C ellu la r p h o n e + P H S )

Rapid Diffusion of Mobile Communications（10 thousand）

Reverse pointSubscriber：55.6million

Mobile：56.9millon(2000.3) Reverse point

Fixed：62.2millionMobile：62.8millon

(2000.11)

8,112

6,077

5,116

26



8. 9

11. 7

12. 0

13. 8

20. 0

29. 1

33. 0

33. 9

74. 9

79. 2

0 20 40 60 80 100

United States

France

Singapore

Germany

Canada

Finland

Argentina

China

Korea

Japan

7.50

34.57

0.05

62.4667.21 million

contracts51.93

41.53

51.14

60.94

69.12

75.65

79.28 millionContracts

0

10

20

30

40

50

60

70

80

90

1998 1999 2000 2001 2002 Nov 2003

Transition in the number of contracts for mobile telephones and the mobile Internet

Mobile telephone Internet compatibility rate in the main countries (as of September 2002)(Ratio of mobile Internet contracts as a percentage of total mobile telephone contracts).

Created by documents from Baskerville CommunicationsMPHPT Survey

(Number of mobile telephone contracts)

(Number of mobile Internet contracts)

Number 1 in the world for Internet compatibility in mobile telephones

The number of contracts has jumped to more than 67 million in only 4.5 years.

（％）

(Note) Mobile Internet began service in February 1999

(million contracts)

Japan Currently Enjoying a Major Lead in the Use of the Mobile Internet

◇ The number of mobile Internet contracts has jumped to more than 67 million in only 4.5 years.

◇ Internet compatibility for mobile phones in Japan is No.1 in the world at around 80%.

27


(1) Increasing number of Telecommunications Carriers and Progress of Competition

(2) Expansion of Telecommunications Expansion of Telecommunications MarketMarket

28

3. Current Situation in Japan(2) Expansion of Telecommunications Market

88.72 97.50 103.85 106.63 115.01 123.10

79.22

8.6% 9.3% 10.0%10.9% 11.2% 11.8%

12.6%

40

60

80

100

120

140

1995 1996 1997 1998 1999 2000 2001

(trillion yen)

0%

2%

4%

6%

8%

10%

12%

14%

Information and communications industry Proportion to overall industries

(Year)―（）（12.0％）

（9.9％）（6.5％）（2.7％）（7.0％）（7.9％）

* The percentages in brackets indicate changes over the previous year.

88.72 97.50 103.85 106.63 115.01 123.10

79.22

8.6% 9.3% 10.0%10.9% 11.2% 11.8%

12.6%

40

60

80

100

120

140

1995 1996 1997 1998 1999 2000 2001

(trillion yen)

0%

2%

4%

6%

8%

10%

12%

14%

Information and communications industry Proportion to overall industries

(Year)―（）（12.0％）

（9.9％）（6.5％）（2.7％）（7.0％）（7.9％）

* The percentages in brackets indicate changes over the previous year.

Transitions in the Market Size and Proportion of the Information and Communications Industry to Overall Industries

29


025,00050,00075,000

100,000125,000150,000175,000200,000

1996 1997 1998 1999 2000 2001 2002

(2) Expansion of Telecommunications Market

Transition of the gross sales of Telecommunication business

: Type1 Carriers

: Type2 Carriers

(100 million yen)

(FY)

Documents

1 Regulatory Reform of Domestic Regulations in the Telecommunications Sector - Japanese Experience- FURUICHI, Hirohisa Senior Advisor General Affairs Division